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Are Business History and Economic Theory Compatible?1
Published online by Cambridge University Press: 24 July 2012
Abstract
The pragmatic approach adopted by business historians has inhibited utilization of their findings for theoretical purposes. Economic theory, at the same time, has hitherto provided no apparatus for attacking a whole range of problems deemed vital by historians today. The consequent breach between business history and economic theory, however, may be bridged by the development of new theoretical tools. Linear programming, statistical decision theory, and the theory of games are examples of arenas where the skills and interests of historian and theorist can converge.
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- Copyright © The President and Fellows of Harvard College 1955
References
2 This does not imply, of course, that the subjects which interest one discipline exhaust the interests of the other. The economist, for example, is concerned with macroeconomic problems in which the particular institutional form of business units may be irrelevant. I am discussing the lack of contact between economic theory and business history, however, in studying the same set of facts dealing with the individual firm or entrepreneur.
3 Gras, N. S. B., “Are You Writing a Business History?” Bulletin of the Business Historical Society, XVIII (Oct., 1944), 73Google Scholar. This definition of business history as the record of managerial policies regarding the administration and control of a firm recurs consistently in the writings of Professors Gras and Larson. Cf. Gras, N. S. B. and Larson, Henrietta M., Casebook in American Business History (New York, 1939), pp. v, 3Google Scholar, et passim.
4 These topics are set forth in a more detailed outline in N. S. B. Gras, “Are You Writing a Business History?” loc. cit., pp. 73–110.
5 Two volumes in the Harvard Studies in Business History illustrate the difference in degree to which external influences can affect a firm: Navin, Thomas R., The Whitin Machine Works Since 1831 (Cambridge, Mass., 1950)CrossRefGoogle Scholar; and Hidy, Ralph W., The House of Baring in American Trade and Finance (Cambridge, Mass., 1949)CrossRefGoogle Scholar.
6 Nor is it surprising that the tools are not useful for, as I try to show below, they were fashioned to handle a different kind of problem.
7 N. S. B. Gras and Henrietta M. Larson, eds., Harvard Studies in Business History.
8 Gras, N. S. B., Business and Capitalism (New York, 1939)Google Scholar.
9 After listing some possible types of business history, Professor Cole notes that, “… I am doubtful whether business history can advantageously proceed to more general or broader summaries. Of what would a regional, an industrial, or a national business history consist? On what central thread or group of threads would such a history be hung?” Cole, Arthur H., “Business History and Economic History,” Journal of Economic History (Supplement: Tasks of Economic History, Dec., 1945), p. 47Google Scholar. For a more optimistic expression, see Larson, Henrietta M., “Business History: Retrospect and Prospect,” Bulletin of the Business Historical Society, XX (Dec., 1947), 173–99CrossRefGoogle Scholar.
10 Arthur H. Cole, “Business and Economic History,” loc. cit., pp. 51–53, presents “An Outline of Topics Pertinent to Company Histories” which is oriented toward economic history and the kinds of questions which can be handled by traditional economic theory. Cochran, Thomas C. discusses this subject in “The Economics in a Business History,” Journal of Economic History (Supplement: Tasks of Economic History, Dec., 1945), pp. 54–65CrossRefGoogle Scholar; and in The Pabst Brewing Company (New York, 1948)Google Scholar, Professor Cochran offers an example of how economic theory can serve as a useful framework within which to analyze such factors as location, demand conditions, cost structures, and the effect of the market on pricing policies and sales activities.
11 “Notice by the Editors,” Economic Journal, LXIV (March, 1954), 1–2Google Scholar.
12 At some formal level of analysis, this distinction becomes blurred. It is logically possible to derive any results which are obtained from a linear programming formulation by a proper reformulation of the problem in terms of more traditional techniques. The new techniques, accordingly, are not intrinsically superior to existing theory; but they are more amenable to use by business historians in investigating the kinds of issues which interest them.
13 Perhaps they are available only at higher prices, but that does not affect the issue.
14 This is one very practical stimulus which persuades firms to convert to war production. Cf. Navin, op.cit., regarding the wartime problems of the Whitin Machine Works.
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16 This does not mean that conceptual realism is necessarily a theoretical virtue. I only assert that it is an inestimable advantage for the historian who wants to use theory.
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19 Namely, conditions over which the individual entrepreneur has no control and to which he must adapt his operations.
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